Court of Appeal clarifies scope of potential liability under the Misrepresentation Act 1967

A recent Court of Appeal decision provides welcome clarity for issuers on the scope of their potential liability under the Misrepresentation Act 1967, and the use of disclaimers to restrict that scope: Taberna Europe CDO II Plc v Selskabet (formerly Roskilde Bank A/S) (In bankruptcy) [2016] EWCA Civ 1262.

The court held that the publication of an investor presentation in a way that actively invites investors to make use of its contents for a purpose other than the presentation's original purpose could create sufficient proximity to give rise to a duty of care in relation to the content of the presentation. However, potential liability for a misrepresentation in a document can be avoided by a valid disclaimer of liability contained in the same document notwithstanding that the disclaimer itself had no contractual effect (ie was merely a non-contractual notice).

Further, the Court of Appeal (contrary to the first instance decision) determined that section 2(1) of the 1967 Act applies only to a contract which the representee has been induced to enter into directly by the representor, and does not extend to obligations of a contractual nature which the representee acquires from a third party and in respect of which it would have no right of rescission.

For more information, please see our Banking litigation e-bulletin on the decision.